No Annual Fee Credit Cards: What are the Advantages?

Even the most diligent among us could face an uphill battle when it comes to managing the costs of holding any number of credit cards. Part of the reason could be due to annual and other credit card fees—including those for balance transfers and cash advances that could amount to hundreds of dollars a year.

Annual fees in particular, though, are easy to avoid. Here’s how opting for a no annual fee card up-front could benefit you.

No Making Up the Cost of the Fee
They say there is no free lunch, and this is especially true when it comes to annual credit card fees.

For example, say you opt for a card that charges you several hundred dollars a year to use it, but offers many perks in return. Your job is to figure out if the benefits outweigh the costs.

A lot of this is going to be specific to your spending habits. Are you a frequent traveler? Then a fee card with rewards like airline miles and travel insurance might make sense if the value of the rewards you earn traveling are greater than the card’s annual fee. Do you live in a city and rely primarily on mass transit? Then a card with reward points tied to your monthly gas purchase will most likely not be for you.

What’s more, just because a fee-bearing card offers illustrious rewards doesn’t mean it’s easy to use them. If it takes several calls to customer service and a long time on the card issuer’s site to find redemption instructions, it may not be worth the hassle. It’s also important to note that benefit packages change, and some perks that come with annual-fee cards like miles or hotel points can be subject to blackout dates.1

Less to Budget For
This is a no-brainer: If you’re not great at managing your money, stay away from cards with annual fees. Unlike monthly fees like rent, student loans or gas and electric bills, which you may be in the habit of paying regularly, once-yearly fees may come as a surprise.